Manhattan Apartment Inventory Slides to Seven-Year Low

By Oshrat Carmiel -
Oct 2, 2012

Manhattan’s inventory of homes for
sale plunged to a seven-year low in the third quarter as owners
refrained from listing their properties in a market with flat
prices, limiting a rebound in deals as buyer demand picks up.

The number of apartments on the market totaled 5,847 at the
end of the quarter, a 24 percent decline from a year earlier and
the lowest since the first three months of 2005, according to a
report today by appraiser Miller Samuel Inc. and brokerage
Prudential Douglas Elliman Real Estate. Sales fell 5 percent to
2,952, while still reaching the second-highest level since 2008.

Buyers are returning to the market as apartment rents surge
and mortgage rates fall to record lows, only to find a dwindling
supply of homes for sale, said Jonathan Miller, president of
Miller Samuel. The absorption rate, or amount of time it would
take to sell all the listed properties at the current pace of
sales, was 5.9 months, the fastest since 2007.

The median price of all condominiums and co-ops that
changed hands in the quarter fell 2.3 percent from a year
earlier to $890,000, according to Miller Samuel and Prudential.

Sellers aren’t in a rush to tap into rebounding demand
because the Federal Reserve has signaled it will keep borrowing
costs low through 2015, according to Miller. Owners who bought
during Manhattan’s market peak and saw their values fall may not
have built up enough equity to sell and buy something bigger, he
said. They also see no reason to enter a rental market where
lease rates are poised to surpass their 2006 record, he said.

No Urgency

“People are just enjoying their apartments,” Miller said.
“There’s no advantage for many to rent and they’re not able to
trade up so they’re waiting because there’s no urgency.”

The trend is playing out across the U.S. as prices
nationally start to increase. About 2.47 million previously
owned homes were for sale in August, an 18 percent drop from a
year earlier and close to the lowest level since 2005, according
to the National Association of Realtors.

The average rate for a 30-year fixed loan fell to a record
low of 3.4 percent last week, the lowest in data going back to
1971, according to Freddie Mac. The average 15-year rate dropped
to 2.73 percent, also a record, as the Federal Reserve resumed
purchases of mortgage-backed securities.

Sitting Out

The low rates mean Manhattan owners might be inclined to
refinance instead of sell, while waiting for market values to
improve, said Sofia Song, vice president of research for
property listings website StreetEasy.com, which also released a
report on the Manhattan market today.

“If they’re serious sellers, there’s some reason behind
it,” said Hall Willkie, president of brokerage Brown Harris
Stevens, which also released a report today.

Hans De Groot, an attorney who heads the international tax
department of Viacom Inc. (VIAB), decided to sell his three-bedroom
condominium in the Clinton neighborhood because he was trading
up to another property in the area -- and he was able to
complete both deals within six months.

De Groot and his wife, seeking outdoor space, started their
search in February and by August had closed on a three-bedroom
townhouse with a private parking garage at the Dillon, a new
development on West 53rd Street between Ninth and Tenth avenues.
The property, for which he paid $3.73 million, includes a
private back yard, with room for a dining table and an outdoor
sofas amid the backdrop of an ivy-covered brick wall.

‘Very European’

“People who have visited me have said this is fantastic,
but it’s very European,” said De Groot, 63, who moved to New
York from the Netherlands.

De Groot listed his old apartment on 58th Street for $2.95
million in May and found a buyer by August, after lowering the
asking price to $2.895 million, according to StreetEasy. He paid
$2.49 million for it in 2006.

“I have the feeling that prices are not falling,” De
Groot said. “On the contrary, I have the feeling that they are
moving up, just not at the speed that they were in 2006.”

Other reports issued today on the Manhattan apartment
market showed dwindling inventory and and an appetite among
buyers to acquire what’s available. Corcoran Group said
inventory was at its lowest point in more than seven years, with
7,041 available listings. Sales reached a four-year high of
3,821 closed deals, while the median price was little changed
from a year earlier at $850,000.

Rising Price

StreetEasy said purchases of condos and co-ops totaled
3,942, a 17 percent increase from a year earlier, while the
median closing price climbed 1.2 percent to $850,000. The figure
is an estimate that includes transfers recorded with the the New
York City Department of Finance by Sept. 30, as well as
transactions that were completed in September and are expected
to be recorded later.

The number of units listed for sale shrunk 12 percent from
last year to 12,599, StreetEasy said.

Brown Harris Stevens and its sister brokerage, Halstead
Property LLC, reported a 12 percent increase in the number of
sales to 2,790, the highest quarterly total since the aftermath
of Lehman Brothers Holdings Inc.’s bankruptcy four years ago.

Purchases of luxury apartments, defined as the top 10
percent of all sales by price, totaled 295 deals, a 5.1 percent
decline from a year earlier, Miller Samuel and Prudential said.
The median price of those transactions fell 2.6 percent to $4.07
million.

On the Upper East Side, the median price of previously
owned co-ops fell 1 percent from a year earlier to $840,000,
according to Corcoran. Condo prices in the neighborhood fell 6
percent to a median $1.03 million.

On the Upper West Side, the median price of co-op resales
was little changed at $795,000, while condo resale prices
dropped 1 percent to $1.13 million.